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Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don't make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Verisk Analytics, Inc. (NASDAQ:VRSK) to find out whether there were any major changes in hedge funds' views.
Is VRSK a good stock to buy now? Money managers were getting more optimistic. The number of bullish hedge fund bets improved by 4 recently. Verisk Analytics, Inc. (NASDAQ:VRSK) was in 40 hedge funds' portfolios at the end of September. The all time high for this statistic is 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that VRSK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 36 hedge funds in our database with VRSK positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Charles Akre of Akre Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to review the new hedge fund action encompassing Verisk Analytics, Inc. (NASDAQ:VRSK).
Do Hedge Funds Think VRSK Is A Good Stock To Buy Now?
At the end of the third quarter, a total of 40 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in VRSK over the last 21 quarters. With the smart money's capital changing hands, there exists a select group of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).
Among these funds, Akre Capital Management held the most valuable stake in Verisk Analytics, Inc. (NASDAQ:VRSK), which was worth $454.1 million at the end of the third quarter. On the second spot was Ako Capital which amassed $180.6 million worth of shares. Impax Asset Management, Echo Street Capital Management, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Akre Capital Management allocated the biggest weight to Verisk Analytics, Inc. (NASDAQ:VRSK), around 3.2% of its 13F portfolio. Ako Capital is also relatively very bullish on the stock, designating 2.83 percent of its 13F equity portfolio to VRSK.
As industrywide interest jumped, key hedge funds have jumped into Verisk Analytics, Inc. (NASDAQ:VRSK) headfirst. PEAK6 Capital Management, managed by Matthew Hulsizer, assembled the biggest position in Verisk Analytics, Inc. (NASDAQ:VRSK). PEAK6 Capital Management had $2.6 million invested in the company at the end of the quarter. Alec Litowitz and Ross Laser's Magnetar Capital also initiated a $2.3 million position during the quarter. The other funds with new positions in the stock are Mikal Patel's Oribel Capital Management, Ran Pang's Quantamental Technologies, and Karim Abbadi and Edward McBride's Centiva Capital.
Let's go over hedge fund activity in other stocks similar to Verisk Analytics, Inc. (NASDAQ:VRSK). We will take a look at KLA Corporation (NASDAQ:KLAC), Marriott International Inc (NASDAQ:MAR), MSCI Inc (NYSE:MSCI), The Hershey Company (NYSE:HSY), Republic Services, Inc. (NYSE:RSG), Cadence Design Systems Inc (NASDAQ:CDNS), and Brown-Forman Corporation (NYSE:BF). All of these stocks' market caps are closest to VRSK's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KLAC,33,899003,-4 MAR,56,2334020,8 MSCI,47,906149,3 HSY,43,1230648,4 RSG,37,870212,0 CDNS,37,1208067,-2 BF,32,672078,4 Average,40.7,1160025,1.9 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.7 hedge funds with bullish positions and the average amount invested in these stocks was $1160 million. That figure was $1112 million in VRSK's case. Marriott International Inc (NASDAQ:MAR) is the most popular stock in this table. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 32 bullish hedge fund positions. Verisk Analytics, Inc. (NASDAQ:VRSK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for VRSK is 55.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately VRSK wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); VRSK investors were disappointed as the stock returned 5.3% since the end of September (through 12/14) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.